Flood of U.S. ethanol spilling into foreign markets

Candace Krebs

Friday

May 28, 2010 at 12:01 AMMay 28, 2010 at 12:35 PM

Despite ethanol’s pitch as a domestic replacement for imported oil — and one that may offer fewer environmental risks following the oil well explosion in the Gulf that continues to impact the southern coast — the market for U.S. ethanol is actually growing faster overseas.

Ethanol exports have boomed in recent months, with shipments destined for dozens of energy-thirsty nations around the globe, including some in the Middle East. The United States has been a net importer of ethanol for the last decade, but the nation is quickly evolving into a net exporter, according to the Renewable Fuels Association.

Despite ethanol’s pitch as a domestic replacement for imported oil — and one that may offer fewer environmental risks following the oil well explosion in the Gulf that continues to impact the southern coast — the market for U.S. ethanol is actually growing faster overseas.

Ethanol exports have boomed in recent months, with shipments destined for dozens of energy-thirsty nations around the globe, including some in the Middle East. The United States has been a net importer of ethanol for the last decade, but the nation is quickly evolving into a net exporter, according to the Renewable Fuels Association.

That’s not due to a lack of efforts by the corn industry to enhance domestic use of ethanol. In Colorado, corn growers recently initiated the state’s first blender pump at the Stratton Equity Co-op Station in Burlington.

The goal of the project is to open blender pumps at 10 locations statewide by providing a combination of technical, monetary and promotional assistance to fuel retailers.

“There’s no better way to promote our industry — the corn industry — than using our own product,” said Rick Palkowitsh, who farms near Burlington.

Dan Slinger, general manager of Stratton Equity, said about 3 million bushels of the co-op members’ corn goes for ethanol production. The U.S. annually consumes 10 billion gallons of ethanol, reducing crude oil needs by 7 percent, according to Colorado Commissioner of Agriculture John Stulp.

Ethanol’s impact on the corn market adds price support in the range of $1.50 to $2 a bushel, according to Colorado Corn. There are now more than 100 ethanol pumps across the state.
Even so, the Renewable Fuels Association is concerned by how much American ethanol is being exported instead of being utilized at home.

“The fact that U.S. ethanol exports are surging as domestic markets become saturated demonstrates that America’s ethanol industry can and will compete globally. The question becomes: Do we want to export our biofuels and the benefits they provide, or do we want to use them here at home to help secure our energy future? Given the opportunity, today’s industry can do both,” said RFA Vice President of Research Geoff Cooper. “Unfortunately, current regulations restrict the amount of ethanol that can be used domestically. Therefore, the industry is being forced to look to the export market for additional growth opportunities.”

U.S. ethanol cost competitive

Data from the U.S. Department of Agriculture, Department of Commerce and the Census Bureau indicate significantly increased U.S. ethanol exports in 2010. In March 2010, the U.S. exported more than 45 million gallons of ethanol. For the first quarter of 2010, U.S. exports exceeded 83 million gallons. By country, Canada and the Netherlands lead the way.

Interestingly, U.S. ethanol is also finding its way into Brazil and even OPEC nations in the Middle East. One reason for America’s surge as a global ethanol trader is its current advantage as the world’s low cost producer. Despite the Brazilian ethanol industry’s recent attempts to portray its product as always being the cheapest in the world, current prices show Iowa ethanol plant-gate ethanol prices are 50 cents per gallon lower than Brazilian ethanol prices, according to the RFA.

A second reason for the surge in U.S. exports is the saturated domestic market for ethanol. The amount of ethanol that can be blended into gasoline is currently capped at 10 percent, but RFA would like to see the restriction lifted.

In a recent analysis, the RFA concluded, “As long as domestic ethanol usage is restricted by the regulatory limitation on 10 percent blends, the U.S. ethanol industry will be forced to look to the global marketplace for new demand sources.

“And, as a result, Americans will miss out on the opportunity for greater fuel savings and a healthier, more secure domestic energy supply.”

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